[Federal Register Volume 60, Number 60 (Wednesday, March 29, 1995)]
[Notices]
[Pages 16148-16154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7634]
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FEDERAL TRADE COMMISSION
[File No. 912 3232]
Taleigh Corporation, et al.; Proposed Consent Agreement With
Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, two marketing corporations and the owner
from misrepresenting that any product is new or unique, the existence
or conclusions of any test or study, or that an endorsement for any
product represents the typical experience of people who use it. The
consent agreement would require the respondents to possess scientific
evidence to substantiate any representation regarding the performance,
benefits, efficacy or safety of any weight-loss or stop-smoking
product, or of any food, dietary supplement, drug, or device. In
addition, the consent agreement would require the owner to post a
$300,000 performance bond, or to establish an escrow account in the
amount of $300,000, as a condition of advertising, promoting, selling
or distributing any weight-loss or smoking deterrent or cessation
product.
DATES: Comments must be received on or before May 30, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Joel Winston or Richard Cleland, FTC/S-4002, Washington, D.C. 20580.
(202) 326-3153 or 326-3088.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final [[Page 16149]] approval, by the Commission, has been placed on
the public record for a period of sixty (60) days. Public comment is
invited. Such comments or views will be considered by the Commission
and will be available for inspection and copying at its principal
office in accordance with Section 4.9(b)(6)(ii) of the Commission's
Rules of Practice (16 CFR 4.9(b)(6)(ii)).
In the Matter of: Raleigh Corporation, and Choice Diet Products,
Inc., corporations; and William J. Santamaria, individually and as
an officer and director of said corporations.
Agreement Containing Consent Order To Cease and Desist
The Federal Trade Commission having initiated an investigation of
Taleigh Corporation, a Florida corporation, Choice Diet Products, Inc.,
a New York corporation, and William J. Santamaria, individually and as
an officer of said corporations (``proposed respondents''), and it now
appearing that proposed respondents are willing to enter into an
agreement containing an order to cease and desist from the use of the
acts and practices being investigated,
It is hereby agreed by and between Taleigh Corporation, a Florida
corporation, by its duly authorized officer, Choice Diet Products,
Inc., a New York corporation, by its duly authorized officer, and
William J. Santamaria, individually and as an officer of said
corporation, and their attorney, and counsel for the Federal Trade
Commission that:
1. Proposed respondent Taleigh Corporation, formerly known as
Taleigh, Inc., a Florida corporation, is organized, exists and does
business under and by virtue of the laws of the State of Florida. At
times relevant hereto, its office and principal place of business was
located at 4800 N.W. Boca Raton Boulevard, Boca Raton, FL 33431.
Proposed respondent Choice Diet Products, Inc., a New York
corporation, is organized, exists and does business under and by virtue
of the laws of the State of New York. At times relevant hereto, its
office and principal place of business was located at 4800 N.W. Boca
Raton Boulevard, Boca Raton, FL 33431.
Proposed respondent William J. Santamaria is an officer of said
corporations. He formulates, directs and controls the policies, acts
and practices of said corporation and his address is 20640 Baybrooke
Court, Boca Raton, FL 33498.
2. Proposed respondents admit all the jurisdictional facts set
forth in the draft of complaint.
3. Proposed respondents waive:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law; and
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the Order entered pursuant to this agreement.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the proposed respondents, in which
event it will take such action as it may consider appropriate, or issue
and serve its complaint (in such form as circumstances may require) and
decision in disposition of this proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents that the law has been
violated as alleged in the draft of complaint or that the facts as
alleged in the draft of complaint, other than the jurisdictional facts,
are true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is subsequently withdrawn by the
Commission pursuant to the provision of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to the proposed
respondents, (1) issue its complaint corresponding in form and
substance with the draft of complaint and its decision containing the
following order to cease and desist in disposition of the proceeding
and (2) make information public with respect thereto. When so entered,
the order to cease and desist shall have the same force and effect and
may be altered, modified or set aside in the same manner and within the
same time provided by statute for other orders. The order shall become
final upon service. Delivery by the U.S. Postal Service of the
complaint and decision containing the agreed-to order to proposed
respondent's addresses as stated in this agreement shall constitute
service. Proposed respondents waive any right they may have to any
other manner of service. The complaint may be used in construing the
terms of the order, and no agreement, understanding, representation, or
interpretation not contained in the order or in the agreement may be
used to vary or contradict the terms of the order.
7. Proposed respondents have read the proposed complaint and order
contemplated hereby. They understand that once the order has been
issued, they will be required to file one or more compliance reports
showing that they have fully complied with the order. Proposed
respondents further understand that they may be liable for civil
penalties in the amount provided by law for each violation of the order
after it becomes final.
Order
For purposes of this Order:
1. ``Clearly and prominently'' as used herein shall mean as
follows:
(a) In a television or videotape advertisement: (1) an audio
disclosure shall be delivered in a volume and cadence and for a
duration sufficient for an ordinary consumer to hear and comprehend it;
and (2) a video disclosure shall be of a size and shade, and shall
appear on the screen for a duration, sufficient for an ordinary
consumer to read and comprehend it.
(b) In a print advertisement, the disclosure shall be in close
proximity to the representation that triggers the disclosure in at
least twelve (12) point type.
(c) In a radio advertisement, the disclosure shall be delivered in
a volume and cadence sufficient for an ordinary consumer to hear and
comprehend it.
2. ``Competent and reliable scientific evidence'' shall mean tests,
analyses, research, studies, or other evidence based on the expertise
of professionals in the relevant area that has been conducted and
evaluated in an objective manner by persons qualified to do so, using
procedures generally accepted in the profession to yield accurate and
reliable results.
3. ``Purchase price'' shall mean all amounts paid to respondents in
cash or by check, or charged to a consumer's credit card account or
debited from a consumer's checking account, including, where
applicable, sales tax, and any charges not authorized by consumers to
be charged to their charge card accounts or debited from their checking
accounts, provided however, with regard to Part XIV, purchase price
shall not include shipping or handling charges if such charges are not
included in respondents' guarantee or refund offer.
4. ``Weight-loss product'' shall mean any product or program
designed or used to prevent weight gain or to produce weight loss,
reduction or [[Page 16150]] elimination of fat, slimming, or caloric
deficit in a user of the product or program.
5. ``Smoking deterrent or cessation product'' shall mean any
product or program designed to aid or assist the user to stop or reduce
the cigarette urge, break the cigarette habit, or stop or reduce
smoking.
I
It is ordered that respondents, Taleigh Corporation and Choice Diet
Products, Inc., corporations, their successors and assigns, and their
officers; and William J. Santamaria, individually and as an officer and
director of the corporate respondents; and respondents' agents,
representatives, and employees, directly or through any partnership,
corporation, subsidiary, division, or other device, in connection with
the manufacturing, advertising, packaging, labeling, promotion,
offering for sale, sale, or distribution of FormulaTrim 3000, MegaLoss
1000, MegaLoss 3000, MiracleTrim, or any other weight-loss product
containing phenylpropanolamine as the active ingredient, in or
affecting commerce, as ``commerce'' is defined in the Federal Trade
Commission Act, do forthwith cease and desist from representing, in any
manner, directly or by implication, that:
A. Such product causes or assists in causing rapid weight loss;
B. Such product causes or assists in causing substantial weight
loss without the need to exercise or reduce caloric intake;
C. Such product is new or unique or contains a new or unique
ingredient;
D. Such product causes the burning of more body fat than five hours
of aerobics, running ten miles nonstop, swimming two and a half miles,
exercising six hours nonstop, or any similar exercise activity; or
E. Such product contains an active ingredient that, prior to the
sale of such product, was available only through doctors.
II
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any weight-loss
product in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
representing, in any manner, directly or by implication, that such
weight-loss product has any effect on weight or body size, unless
respondents disclose, clearly and prominently, and, in a television or
videotape advertisement, simultaneously in both the audio and video
portions of the advertisement, that reducing caloric intake and/or
increasing exercise is required to lose weight; provided however, that
this disclosure shall not be required if respondents possess and rely
upon competent and reliable scientific evidence demonstrating that such
product is effective without reducing caloric intake and/or increasing
exercise.
III
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
representing, in any manner, directly or by implication, that:
A. Such product or program causes or assists in causing weight
loss, or assists in maintaining weight loss;
B. Such product or program causes or assists in causing weight loss
without exercise or reducing caloric intake;
C. Such product or program causes the burning of more body fat than
any amount of exercise activity; or
D. Such product or program causes or assists the user to stop or
reduce smoking easily;
unless such representation is true, and, at the time of making such
representation, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representation.
IV
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of Nicotain, or any
substantially similar product or program, in or affecting commerce, as
``commerce'' is defined in the Federal Trade Commission Act, do
forthwith cease and desist from representing, in any manner, directly
or by implication, that:
A. Such product or program enables users to stop smoking easily; or
B. Such product or program works through a mechanism substantially
similar or equivalent to a prescription smoking deterrent patch.
V
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of Nicotain, or any
other smoking deterrent cessation product, in or affecting commerce, as
``commerce'' is defined in the Federal Trade Commission Act, do
forthwith cease and desist from making, in any manner, directly or by
implication, any misrepresentation, including through the name of the
product, concerning the nature or mechanism of operation of such
product, including, but not limited to, that such product contains
nicotine or works through a mechanism substantially similar or
equivalent to a prescription smoking deterrent patch.
VI
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
[[Page 16151]] connection with the manufacturing, advertising,
packaging, labeling, promotion, offering for sale, sale, or
distribution of any product or program, in or affecting commerce, as
``commerce'' is defined in the Federal Trade Commission Act, do
forthwith cease and desist from misrepresenting, in any manner,
directly or by implication, that:
A. Such product or program is new or unique or contains a new or
unique ingredient;
B. Consumers who order the product or program will receive a
personal consultation from a physician, medical professional or weight-
loss counselor; or
C. Any endorsement (as ``endorsement'' is defined in 16 C.F.R.
Sec. 255.0(b)) of such product or program represents the typical or
ordinary experience of members of the public who use the product or
program.
VII
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
failing to disclose, clearly and prominently, a material connection,
where one exists, between a person providing an endorsement of any
product or program, as ``endorsement'' is defined in 16 C.F.R.
Sec. 255.0(b), and any respondent, or any other individual or entity
manufacturing, labeling, advertising, promoting, offering for sale,
selling, or distributing such product or program. For purposes of this
Order, ``material connection'' shall mean any relationship that might
materially affect the weight or credibility of the endorsement and
would not reasonably be expected by consumers.
VIII
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
misrepresenting, in any manner, directly or by implication, the
contents, validity, results, conclusions, or interpretations of any
test or study.
IX
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
representing, in any manner, directly or by implication, that:
A. Such product or program does not cause any dangerous side
effects, nervous jitters, or insomnia;
B. Such product or program burns, reduces, or diminishes body fat;
or
C. Such product or program significantly shrinks fat cells;
unless, at the time of making such representation, respondents possess
and rely upon competent and reliable scientific evidence that
substantiates the representation.
X
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any weight-loss
product, smoking deterrent or cessation product, food, food or dietary
supplement, drug, or device, as ``food,'' ``drug,'' and ``device'' are
defined in Section 15 of the Federal Trade Commission Act, in or
affecting commerce, as ``commerce'' is defined in the Federal Trade
Commission Act, do forthwith cease and desist from making, in any
manner, directly or by implication, any representation regarding the
performance, benefits, efficacy, or safety of any such product, unless,
at the time of making such representation, respondents possess and rely
upon competent and reliable scientific evidence that substantiates the
representation.
XI
Nothing in this Order shall prohibit respondents from making any
representation that is specifically permitted in labeling for any
product by regulations promulgated by the Food and Drug Administration
pursuant to the Nutrition Labeling and Education Act of 1990.
XII
Nothing in this Order shall prohibit respondents from making any
representation for any drug that is permitted in labeling for any such
drug under any tentative final or final standard promulgated by the
Food and Drug Administration, or under any new drug application
approved by the Food and Drug Administration.
XIII
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
charging a consumer's credit card account or debiting a consumer's
checking account in an amount in excess of the amount affirmatively
authorized by the consumer.
XIV
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their [[Page 16152]] officers; and William J. Santamaria,
individually and as an officer and director of the corporate
respondents; and respondents' agents, representatives, and employees,
directly or through any partnership, corporation, subsidiary, division,
or other device, in connection with the manufacturing, advertising,
packaging, labeling, promotion, offering for sale, sale, or
distribution of any product or program, in or affecting commerce, as
``commerce'' is defined in the Federal Trade Commission Act, do
forthwith cease and desist from:
A. Representing, directly or by implication, that consumers can
receive a refund, through such terms as ``money back guarantee'' or
similar terms, unless respondents refund the full purchase price at the
consumer's request in accordance with the provisions of this Part;
B. Failing to disclose, clearly and prominently, any material
limitations or conditions that apply to a guarantee, warranty or refund
policy;
C. Failing to comply, where applicable, with the requirements of
Section 166 of the Truth in Lending Act, 15 U.S.C. Sec. 1666e and 12
CFR 226.12(e)(1); and
D. Failing to refund the full purchase price in accordance with the
terms of a guarantee, warranty or refund policy within a reasonable
period of time after a consumer complies with the conditions for
receiving a refund. For purposes of this Part, ``a reasonable period of
time'' shall be:
(1) That period of time specified in respondents' solicitation if
such period is clearly and prominently disclosed to the consumer in the
solicitation; or
(2) If no period of time is clearly and prominently disclosed, a
period of thirty (30) days following the date that the consumer
complies with the conditions for receiving a refund.
For purposes of determining whether a consumer has complied with the
conditions for receiving a refund, the date for determining whether the
consumer has returned the product or program within the specified time
shall be the date the consumer mails or causes the product or program
to be shipped to the respondents or respondents' designated agents.
XV
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; and respondents'
agents, representatives, and employees, directly or through any
partnership, corporation, subsidiary, division, or other device, in
connection with the manufacturing, advertising, packaging, labeling,
promotion, offering for sale, sale, or distribution of any product or
program, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from
violating any provision of The Mail or Telephone Order Merchandise
Rule, 16 CFR Part 435, as amended, effective March 1, 1994, 58 F.R.
49095.
XVI
It is further ordered that respondent William J. Santamaria, and
respondent Santamaria's agents, representatives, and employees,
directly or through any partnership, corporation, subsidiary, division,
joint venture or other device, do forthwith cease and desist from
advertising, promoting, offering for sale, selling, or distributing any
weight-loss product or smoking deterrent or cessation product to the
general public, unless, prior to advertising, promoting, offering for
sale, selling, or distributing to the general public any such product,
respondent Santamaria first obtains a performance bond in the principal
sum of three hundred thousand dollars ($300,000). Said bond shall be
conditioned upon compliance by respondent Santamaria with the
provisions of the Federal Trade Commission Act, and with the provisions
of this Order. The bond shall be deemed continuous and remain in full
force and effect as long as respondent Santamaria continues to
advertise, promote, offer for sale, sell, or distribute any weight-loss
product or smoking deterrent or cessation product, directly or
indirectly, to the general public, and for at least five (5) years
after he has ceased any such activity. The bond shall cite this Order
as the subject matter of the bond and provide surety against respondent
Santamaria's failure to pay consumer redress or disgorgement as set
forth herein. Such performance bond shall be an insurance agreement
providing surety issued by a surety company that is admitted to do
business in a state in which respondent Santamaria is doing business
and that holds a Federal Certificate of Authority as Acceptable Surety
on Federal Bond and Reinsuring.
Respondent Santamaria shall provide a copy of such performance bond
to the associate director of the Federal Trade Commission's Division of
Enforcement, 6th Street & Pennsylvania Avenue, N.W., Washington, D.C.
20580, prior to the commencement of any business for which such bond is
required.
Provided, however, in lieu of a performance bond, respondent
Santamaria may establish and fund, pursuant to the terms set forth
herein, an escrow account in the principal sum of three hundred
thousand dollars ($300,000) in cash, or such other assets of equivalent
value, which the Commission, or its representative, in its sole
discretion may approve. Respondent Santamaria shall maintain such
amount in that account for so long as he continues to advertise,
promote, offer for sale, sell, or distribute any weight-loss product or
smoking deterrent or cessation product, directly or indirectly, to the
general public, and for at least five (5) years after he has ceased any
such activity. Respondent Santamaria shall pay all costs associated
with the creation, funding, operation, and administration of the escrow
account. The Commission, or its representative, shall, in its sole
discretion, select the escrow agent. The escrow agreement shall be in
substantially the form attached to this Order as Exhibit A.
The performance bond or escrow agreement shall provide that the
surety company or escrow agent, within thirty days following receipt of
notice that a final judgment or an order of the Commission against
respondent Santamaria for consumer redress or disgorgement in an action
brought under the provisions of the Federal Trade Commission Act has
been entered, or, in the case of an order of the Commission, has become
final, finding that he has violated the terms of this Order or the
Federal Trade Commission Act, and determining the amount of consumer
redress or disgorgement to be paid, shall pay to the Commission so much
of the performance bond or funds of the escrow account as does not
exceed the amount of consumer redress or disgorgement ordered, and
which remains unsatisfied at the time notice is provided to the surety
company or escrow agent, provided that, if respondent Santamaria has
agreed to the entry of a court order or an order of the Commission, a
specific finding that Santamaria violated the terms of this Order or
the provisions of the Federal Trade Commission Act shall not be
necessary. A copy of the notice provided for herein shall be mailed to
respondent Santamaria at his last known address.
Respondent Santamaria may not disclose the existence of the
performance bond or escrow account to any consumer, or other purchaser
or prospective purchaser, to whom a [[Page 16153]] covered product is
advertised, promoted, offered for sale, sold, or distributed, without
also disclosing at the same time and in a like manner that the
performance bond or escrow account is required by order of the Federal
Trade Commission in settlement of charges that respondent Santamaria
engaged in false and misleading representations.
XVII
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., shall:
A. Within thirty (30) days after service of this Order, provide a
copy of this Order to each of respondents' current principals,
officers, directors, and managers, and to all personnel, agents, and
representatives having sales, advertising, or policy responsibility
with respect to the subject matter of this Order; and
B. For a period of five (5) years from the date of issuance of this
Order, provide a copy of this Order to each respondents' future
principals, officers, directors, and managers, and to all personnel,
agents, and representatives having sales, advertising, or policy
responsibility with respect to the subject matter of this Order who are
associated with respondents or any subsidiary, successor, or assign,
within three (3) days after the person assumes his or her
responsibilities.
XVIII
It is further ordered that for five (5) years after the last date
of dissemination of any representation covered by this Order,
respondents, or their successors and assigns, shall maintain and upon
request make available to the Federal Trade Commission or its staff for
inspection and copying:
A. All materials that are relied upon in disseminating such
representation; and
B. All tests, reports, studies, surveys, demonstrations or other
evidence in their possession or control that contradict, qualify, or
call into question such representation, or the basis relied upon for
such representation, including complaints from consumers.
XIX
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., shall notify the Federal Trade Commission
at least thirty (30) days prior to any proposed change in their
corporate structures, including but not limited to dissolution,
assignment, or sale resulting in the emergence of a successor
corporation, the creation or dissolution of subsidiaries or affiliates,
the planned filing for a bankruptcy petition, or any other corporate
change that may affect compliance obligations arising out of this
Order.
XX
It is further ordered that respondent, William J. Santamaria,
shall, for a period of seven (7) years from the date of issuance of
this Order, notify the Commission within thirty (30) days of the
discontinuance of his present business or employment and of his
affiliation with any new business or employment. Each notice of
affiliation with any new business or employment shall include
respondent's new business address and telephone number, current home
address, and a statement describing the nature of the business of
employment and his duties and responsibilities.
XXI
It is further ordered that respondents, Taleigh Corporation and
Choice Diet Products, Inc., corporations, their successors and assigns,
and their officers; and William J. Santamaria, individually and as an
officer and director of the corporate respondents; shall, within sixty
(60) days after service of this Order, and at such other times as the
Federal Trade Commission may require, file with the Commission a
report, in writ ing, setting forth in detail the manner and form in
which they have complied with this Order.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement, subject to
final approval, to a proposed consent order from proposed respondents
Taleigh Corporation, Choice Diet Products, Inc., and William J.
Santamaria.
The proposed consent order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement and take other appropriate action or make
final the agreement's proposed order.
This matter concerns advertising and trade practices related to the
sale of several weight-loss pills and a smoking cessation product. The
Commission's Complaint alleges that proposed respondents Taleigh
Corporation, Choice Diet Products, Inc., and William J. Santamaria made
a number of false claims regarding the speed and ease with which
consumers can burn fat and lose substantial amounts of weight with
proposed respondents' weight-loss pills--MegaLoss, FormulaTrim, and
MiracleTrim. The Complaint also alleges that proposed respondents
falsely promoted these products as new or unique, as causing weight
loss without the need for users to diet or exercise, and as providing
the same weight-loss benefits as exercise. With respect to MiracleTrim,
the Complaint also alleges that respondents falsely represented that
consumers who ordered MiracleTrim would receive a personal weight-loss
consultation from a qualified professional.
With respect to MegaLoss, the Complaint also alleges that proposed
respondents represented that the product would not cause nervous
jitters or insomnia, or have any dangerous side effects, and that,
prior to the sale of MegaLoss, the active ingredient in the product was
not available without a prescription. The Complaint further alleges
that respondents represented that FormulaTrim and MegaLoss would ``burn
fat'' and that MegaLoss and MiracleTrim would significantly shrink
millions of fat cells.
The Complaint also alleges that proposed respondents falsely and
misleadingly represented that they possessed and relied upon a
reasonable basis when they made the claims set forth above. The
Complaint further alleges that proposed respondents falsely represented
that the MegaLoss and FormulaTrim pills are scientifically proven to
cause significant weight loss. The Complaint also charges that proposed
respondents failed to disclose adequately that certain consumer
endorsers appearing in their advertising had a material connection to
proposed respondents, in that the consumers had been compensated or
offered significant compensation for their endorsement.
The Complaint further alleges that proposed respondents have
engaged in several unfair and deceptive trade practices, including: (1)
Debiting consumers' bank accounts or billing consumers' credit card
accounts without their authorization; (2) offering a money-back
guarantee in their ads and then denying refunds or failing to make
timely refunds to consumers who have returned the product within the
required time period; (3) failing to deliver products at all or failing
to deliver products within a reasonable period of time; and (4)
violating the Truth in Lending Act by not processing credit charges in
a timely fashion.
Regarding Nicotain, a purported smoking cessation product, the
Complaint charges proposed respondents with representing falsely
[[Page 16154]] and without a reasonable basis that Nicotain enables
smokers to stop smoking quickly and easily, and that it works through
the same mechanism as a prescription smoking deterrent patch.
With respect to the advertising for both the weight loss pills and
Nicotain, the Complaint alleges that proposed respondents falsely
represented that consumer testimonials appearing in the ads reflect the
typical or ordinary experience of members of the public who have used
the products.
The proposed consent order ontains provisions designed to remedy
the violations charged and to prevent the proposed respondent from
engaging in similar acts in the future.
Part I of the proposed order prohibits proposed respondents from
representing that MegaLoss, FormulaTrim, and MiracleTrim, or any other
weight-loss product containing phenylpropanolamine as the active
ingredient: (1) Causes or assists in causing rapid weight loss; (2)
causes or assists in causing substantial weight loss without the need
to exercise or reduce caloric intake; (3) is new or unique or contains
a new or unique ingredient; (4) causes the burning of more body fat
than certain strenuous exercise; or (5) contains an active ingredient
that, prior to the sale of such product, was available only through
doctors.
Part II requires the proposed respondents to disclose that diet or
exercise are required to lose weight in connection with any
representation about the effect of a weight-loss product on weight or
body size, unless they have competent and reliable scientific evidence
to the contrary. Part III prohibits proposed respondents from making
the types of weight-loss, fat burning and smoking cessation claims
alleged in the complaint to be false and unsubstantiated, unless the
claims are true and substantiated by competent and reliable scientific
evidence. Part IV prohibits proposed respondents from representing that
Nicotain or any substantially similar product (a) will enable smokers
to stop smoking easily, or (b) works through a mechanism substantially
similar to a prescription smoking deterrent patch. Part V prohibits any
misrepresentation concerning the nature or mechanism of operation of
any smoking cessation product.
Part VI prohibits proposed respondents from misrepresenting that:
(1) Any product or program is new or unique, or contains a new or
unique ingredient; (2) consumers who order any product or program will
receive a personal consultation from a physician or medically trained
weight-loss counselor; or (3) the results claimed in consumer
testimonials constitute the typical or ordinary experience of members
of the public who use the advertised product or program.
Part VII of the proposed order requires proposed respondents to
disclose, clearly and prominently, a material connection, where one
exists, between any endorser and the proposed respondents.
Part VIII prohibits proposed respondents from misrepresenting the
contents, validity, results, conclusions, or interpretations of any
test or study. Part IX requires that proposed respondents have
competent and reliable scientific evidence to substantiate the
following categories of claims for any product or program: (1) Any
representations regarding dangerous side effects, nervous jitters,
insomnia, or any other adverse health effects; (2) any representations
that the product or program burns, reduces, or diminishes body fat; and
(3) any representations that the product or program will significantly
shrink fat cells. Part X requires proposed respondents to possess
scientific substantiation before making representations regarding the
performance, benefits, efficacy, or safety of any weight-loss product,
smoking deterrent or cessation product, food, food or dietary
supplement, drug, or device.
Parts XI and XII contain safe harbors for claims that are permitted
on the labeling of foods and drugs under the applicable FDA
regulations.
Part XIII bans proposed respondents' practice of charging a
consumer's credit card account of debiting a consumer's checking
account in excess of the amount affirmatively authorized by the
consumer. Under Part XIV, proposed respondents are prohibited from
misrepresenting the terms of a money-back guarantee and from failing to
provide a refund when a consumer has complied with the conditions
stated in the advertisement for obtaining a refund. Part XV prohibits
proposed respondents from failing to comply with the requirements of
the Commission's Mail or Telephone Order Merchandise Rule, as amended,
effective March 1, 1994.
Part XVI requires that as a condition of advertising, promoting,
offering for sale, selling, or distributing any weight-loss product or
smoking deterrent or cessation product, proposed respondent Santamaria
either obtain a performance bond or establish an escrow account in the
amount of $300,000.
Part XVII requires proposed respondents to maintain, for five (5)
years, all materials that support, contradict, qualify, or call into
question any representations they make which are covered by the
proposed order. Part XVIII requires the proposed corporate respondents
to distribute a copy of the order to current and future principals,
officers, directors, and managers, as well as to any employees having
sales, advertising, or policy responsibility with respect to the
subject matter of the order. Under Part XIX of the proposed order, the
proposed corporate respondents must notify the Federal Trade Commission
at least thirty (30) days prior to certain proposed changes in their
structures. Part XX requires that proposed respondent Santamaria, for a
period of seven (7) years, notify the Commission of any change in his
business or employment. Part XXI obliges proposed respondents to file
compliance reports with the Commission.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not to constitute an official interpretation
of the agreement and proposed order or to modify in any way their
terms.
Donald S. Clark,
Secretary.
[FR Doc. 95-7634 Filed 3-28-95; 8:45 am]
BILLING CODE 6750-01-M